Correlation Between Sichuan Yahua and Lonkey Industrial

Can any of the company-specific risk be diversified away by investing in both Sichuan Yahua and Lonkey Industrial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sichuan Yahua and Lonkey Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Yahua Industrial and Lonkey Industrial Co, you can compare the effects of market volatilities on Sichuan Yahua and Lonkey Industrial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sichuan Yahua with a short position of Lonkey Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Yahua and Lonkey Industrial.

Diversification Opportunities for Sichuan Yahua and Lonkey Industrial

0.12

Correlation Coefficient

Sichuan Yahua  Lonkey Industrial

Average diversification

The 3 months correlation between Sichuan and Lonkey is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Yahua Industrial and Lonkey Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonkey Industrial and Sichuan Yahua is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sichuan Yahua Industrial are associated (or correlated) with Lonkey Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonkey Industrial has no effect on the direction of Sichuan Yahua i.e., Sichuan Yahua and Lonkey Industrial go up and down completely randomly.

Pair Corralation between Sichuan Yahua and Lonkey Industrial

Assuming the 90 days trading horizon Sichuan Yahua Industrial is expected to generate 1.12 times more return on investment than Lonkey Industrial. However, Sichuan Yahua is 1.12 times more volatile than Lonkey Industrial Co. It trades about 0.01 of its potential returns per unit of risk. Lonkey Industrial Co is currently generating about -0.06 per unit of risk. If you would invest  1,224  in Sichuan Yahua Industrial on December 2, 2024 and sell it today you would lose (6.00) from holding Sichuan Yahua Industrial or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sichuan Yahua Industrial  vs.  Lonkey Industrial Co

Sichuan Yahua Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Yahua Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sichuan Yahua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lonkey Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lonkey Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sichuan Yahua and Lonkey Industrial

The main advantage of trading using opposite Sichuan Yahua and Lonkey Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Yahua position performs unexpectedly, Lonkey Industrial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lonkey Industrial will offset losses from the drop in Lonkey Industrial's long position.

The idea behind Sichuan Yahua Industrial and Lonkey Industrial Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.